The UK’s Bribery Act, scheduled to come into force on July 1, 2011, will have the most significant impact on the oil and gas industry, according to research by Ernst & Young.
Ernst & Young’s findings are based on an analysis of bribery prosecutions under the U.S. Foreign Corrupt Practices Act (FCPA) over the last 30 years. Analysts from the firm reviewed 118 FCPA cases involving 242 companies and 167 prosecutions and ranked the most prosecuted industries.
Oil and gas companies came in first, accounting for 18 percent of all prosecutions. Life sciences and consumer products were the second and third, accounting for 13 and 12 percent of prosecutions, respectively. Criminal fines were the most common outcome of an FCPA investigation in all three sectors.
Ernst & Young elected to examine the historical data on FCPA prosecutions to forecast the impact of the UK Bribery Act because the Act’s provisions are similar to the FCPA and prohibit similar conduct. The firms predictions may not be precisely on point, however, because the UK Bribery Act is actually more expansive than the FCPA. Most notably, the UK Bribery Act prohibits the bribery of private individuals and companies as well as foreign officials, includes an offense of “corporate failure to prevent bribery” and specifically outlaws facilitation payments, which are permitted in some limited instances under the FCPA.
The UK Bribery Act and guidance to comply with its provisions is explored in more detail here.
Ernst & Young made a point to note that it expects the oil and gas industry to see the harshest impact of the UK Bribery Act, not because the sector is somehow predisposed to greater corruption, but because the sector operates in different parts of the globe. David Lister, a director at the firm’s Fraud Investigations and Dispute Services team, explained “There is no suggestion that individuals and companies within the oil and gas sector [or other sectors on the list] are intrinsically more corrupt than their counterparts in other sectors. Rather, it is the nature and locations of their businesses that exposes them to additional risk.”